My Jewish Currents article on “The Great Exception” sees possibility of another New Deal or Great Society

By Marc Jampole

My recent in-depth reading of Jefferson Cowie’s The Great Exception has made me more confident about the future of social democracy in the United States than I have been in many a moon.  You can find my article on the book and why it makes me so optimistic in the latest issue of Jewish Currents.

The basic premise of The Great Exception is fairly depressing: that the period roughly from 1935-1975, dominated by the wealth redistribution policies of FDR and LBJ, was a great exception to the political tradition of the United States. The current era, ushered in by the election of Ronald Reagan in 1980, is more in tune with the flow of American history, says Cowie.

Building on the ground-breaking work on income inequality by Thomas Piketty and Emmanuel Saez, Cowie characterizes the great exception as a period in which the U.S. enjoyed a relative equality of income. The share of the workforce that was unionized was at an all-time high, while the percentage of income and wealth captured by the top 1 percent was at an historic low. Taxation of the wealthy was at its highest point since the establishment of the income tax, especially during and just after World War II, as the U.S. decided to fund the war through increased taxation (which stands in stark contrast to George W. Bush’s administration, which cut taxes on the wealthy while fighting its two wars). In 1939, only 5 percent of the workforce paid income tax; by the end of the war, it was 74 percent, with marginal tax rates topping out at 90 percent for multimillionaires. The Great Exception also saw, in the early 1970s, the minimum wage come as close to a living wage as it ever has been. Cowie sees it as the only period in American history in which government seemed to work to protect economic security. Polarization between the major political parties was at an all-time low.  

Cowie’s explanation of why 1935-1975 was the Great Exception breaks new ground. He believes that the political will to provide income protection to Americans and foster a greater equality of wealth through high marginal tax rates, government programs, and pro-union policies came only because our political and public culture in the mid-20th century was homogeneous for the first and only time in U.S. history. When that homogeneity broke apart in the 1960s and 1970s, the impetus for social democracy faded, as the South broke away from the Democratic Party, and the working-class unity that had helped to push the government towards providing economic protections shattered.

By 1935, African-Americans were mostly segregated, thanks to Progressive Era politicians like Woodrow Wilson. Schools, stores, and the workplace, unionized or not, had a fairly homogeneous population, since blacks were segregated both geographically and according to occupation. The New Deal social welfare programs such as Social Security and the minimum wage exempted many occupations dominated by blacks and other minorities, such as agricultural workers and domestics. Cowie doesn’t mention it, but we know from many sources that minority veterans of World War II were denied mortgages and other benefits of the G.I. Bill. Whites received the bulk of the benefits of the Great Exception, especially from 1949-1979, during which time the pretax income of the bottom 60 percent of the income pyramid doubled.

The low level of immigrants in the period 1935-1975 also helped to homogenize the workforce. The U.S. started clamping down on immigration in the early 1920s, and by the time of the New Deal, most immigrants had assimilated into American culture. The Great Exception also saw a temporary relenting of the culture wars that previously had divided much of the working class, as evangelism receded and the ecumenical idea of a universal Judeo-Christian tradition temporarily dominated the mass media and public discourse.

Cowie doesn’t mention it, but reinforcing this ostensible political and cultural homogeneity during the Great Exception was the emergence of the first mass media, which promoted the middle-class white suburbs as the ideal and predominant lifestyle. Thus for the first and, Cowie postulates, the only time in American history, elements of the working class put away differences and cooperated with each other.

But as the workforce became more diverse beginning in the 1960s, the coalition pushing the government to pursue pro-labor policies began to fray. A new wave of immigration, primarily from Latin American and Asian countries, and the integration of the workplace brought about by the civil rights movement, fragmented working-class homogeneity. The culture wars recommenced, revolving around sex-related issues such as abortion, birth control, women’s equality and LGBTQ rights.

The pressure this increased diversity placed on the labor coalition was exacerbated by a concerted business effort, led by the Reagan Administration, to reduce union membership and the political power of unions. For Cowie, the key event marking the end of the prosperity and fairness of the Great Exception was President Ronald Reagan’s firing of the air traffic controllers when they went on strike in 1981, which signaled to the corporate world that the government would not intervene if they also started firing striking workers.

Cowie depicts the federal government during most of American history as large and activist, but always supporting business and corporate interests while fighting organized labor and stressing the rights of individuals. Government has always intervened, but except in the period defined approximately as 1935-1975, it always intervened for business and to protect individual rights, never to provide economic protection or to support labor. Indeed, such elements within the New Deal coalition as Tammany Hall, the South, and the West were at first frightened of government intervention because it had historically only served to help industrialists.

As Cowie says of the Reagan years, the issue never really was — or rarely ever is — whether the ever-expanding government was large or small, as rightwing rhetoric would have us believe. The real issue is towards what ends and whose interest those massive institutions of government are focused.

Cowie’s argument stands or falls on his demonstrating that both before and after the Great Exception, the U.S. political culture was not interested in fostering an equitable distribution of wealth. Despite the relatively short length of the book, Cowie succeeds.

Some point to the Progressive Era as proof that there are precedents for social democratic thinking in the U.S. government before the New Deal. The high-school version of American history praises Progressive Era legislation that constrained big business, such as monopoly and food safety laws. But Cowie makes a strong case that the goal of this legislation was to regulate the new corporate order created by industrialization and the modern corporation, and had nothing to do with seeking economic equity or fostering collective economic security. Rather, progressive legislation set the new ground rules for the new economy.

Progressives such as Woodrow Wilson also saw enforcement of racial boundaries as an achievement. The Progressive Era saw a rise in anti-Semitism and anti-immigrant sentiment, leading to anti-immigration laws that contributed to the homogeneity of the 1930s-1970s. And while there was an uptick in the Democrats’ support of unions during World War I, in contrast to World War II, as soon as the former ended so did the Democrats’ interest in helping labor. In short, progressives thought in terms of ethnic categories, while New Dealers thought in terms of economic classes.

It’s easy to demonstrate that the past thirty-six years have seen a return to the pro-corporate, pro-individual values that Cowie says characterized American politics and government before the Great Exception. Cowie is not the first to call the Reagan years a restoration, not a revolution. Government policies to lower taxes on the wealthy, cut spending on redistribution programs, and weaken laws and regulations protecting unions restored the wealth and income advantage enjoyed by the top 1 percent and top tenth of 1 percent during the Gilded Age — and in less than four decades.

Cowie makes a convincing case that during the current era, the government has supported other trends that tend to fragment the working class and deny them the power to make economic equity an important concern of government. Many post-1960s political concerns of the left have revolved around individual rights, including the opportunity to compete in a tighter job market. The New Deal democratized economic security, whereas beginning sometime in the 1970s, the left began to emphasize the democratization of access to the market, i.e., for minorities, women and LGBTQ individuals. Rights became the dominant political theme, even for the right, which pursued religious rights, school choice, and gun rights. Cowie notes that while African-Americans, women and LGBTQ individuals began to receive equal treatment with white males in the workplace, all groups suffered from the growing inequality of wealth and income.

The current preoccupation with “moral” issues, Cowie observes, has fragmented the working class into a number of special-interest groups, for whom one issue dominates all others. These include groups who fear or dislike African-Americans and other minorities; want to see a revival of religion in American culture; want to escape state structures and state control; and want to control immigration and immigrants.

Unions themselves get some of the blame for ending the Great Exception. Cowie suggests that one reason the Great Exception did not continue is that unions negotiated for benefits and wages only, not for managerial input, as they did in Europe. Without a say in corporate policy, unions were powerless to prevent boards from resorting to policies that did not have the interests of the workers in mind. The Obama years then saw the Supreme Court, which previously had upheld most of the New Deal, give new rights to corporations in the Citizens United and Hobby Lobby cases, much as it gave new rights to corporations in the 19th and early 20th centuries.

If all the progress we have made towards a society that fosters freedom from want occurred in two short bursts of legislation, why do I say that reading The Great Exception has made me more optimistic than I have been in a long?

It comes down to identifying some interesting similarities between the New Deal and the Great Society.

The legislation that produced the Great Exception came in two short bursts: in 1935-1938, after voters gave FDR overwhelming majorities in the House and Senate; and in 1964-1965, after voters did the same thing for LBJ and before he lost the support of the country because of the Vietnam War and the reaction of whites to civil-rights unrest. In both cases, the Republican Party was in a shambles, and special circumstances had given the Democrats their huge majorities. In both cases, the Democratic president was a left-looking centrist with years of experience in the corridors of power.

The Great Recession of 2008 presented the country with another opportunity to push economic equity, when the Democrats won majorities in both houses and another left-looking centrist became president. While we shouldn’t downgrade the importance of the Patient Protection and Affordable Care Act, President Obama spent a lot of political capital pushing it through and the Democrats didn’t spend enough real money trying to maintain majorities in both houses in 2010. The problem was that while Democrats had a large majority, the President was inexperienced and the Republican Party seemed to recover quickly from the debacle of the Bush II presidency and the Great Recession.  A golden opportunity was missed.

The left has another chance in 2016. Hillary Clinton is a left-looking centrist with as much experience in the halls of power as either FDR or LBJ had. Clinton is running on a platform that has specific proposals that address income and wealth inequality, including new taxes on the wealthy. The basic contradiction of the Republican Party — that its economic policies hurt a majority of Republican voters — is coming back to haunt them in the candidacy of Donald Trump, which is built, like the GOP’s long-standing economic and social policies, on a web of lies. Studies show that ticket-splitting is down and every day brings a new reason to vote against Trump. One day it’s his irrational argument with the parents of a fallen soldier. The next day he shows his ignorance of Russia’s military involvement in the Ukraine. The day after he gives radically retro advice to women experiencing sexual discrimination in the workplace, advice that suggests once more than he has no idea how things work in the real world. And yet another new day brings another feud with a prominent Republican.

With any luck, voters will not only elect the Democratic nominee, but also give Clinton a majority in both houses. Democrats will be able to get to work raising taxes on the wealthy, investing in alternative fuels, mass transit and roads, raising the minimum wage, making it easier for unions to organize, fine-tuning Obamacare and fulfilling the rest of their very progressive platform.

Maybe my horror at thinking that the mid-20th century really was a great exception has disoriented me and made me spin an overly optimistic fantasy in my mind. Still, I like the odds that we’ll soon have a Clinton presidency and a Democratic Congress passing legislation that reverses the course of the last forty years and helps to foster the collective economic security of all our citizens.